Difference Between Revenue and Profit

Difference Between Revenue and Profit

Every investor invests his money in the business to earn more profit from it. The profit is to work as an incentive to the investors in taking the risk and blocking their resources. The Profit can be maximised by maximising the total revenue of the business.

But normally these terms are used interchangeably, which is wrong. So, to know the Difference Between Revenue and Profit, First of all, we have to clear the meaning of both terms. These are explained below: 

Meaning of Revenue: –

The total amount received or receivable from the operational or non-operational activities are known as Revenue. The total amount is that amount from which no deduction has been made for expenses In other words, the total income earned by the business within the financial year.

Revenue Can be divided into Subcategories i.e. Revenue from Operational Activities and Revenue from Non- Operational Activities.

Normally, Revenue is used for Operational Revenue Because Non-Operational Revenue is non-recurring in nature and it cannot be estimated.

Examples: –

Revenue Include: –

  1. Total amount earned from the sale of finished stock 
  2. Amount earned from the sale of asset and
  3. Compensation from Court, Commission, rent and subsidies received or earned. 

Formula of Calculation of Revenue: –

“Revenue =  Total Sales + Other Incomes – Sales Return”

“Operational Revenue =  Total Sales  – Sales Return”

“Non-Operational Revenue =  Other Incomes”

 

Meaning of Profit: –

That amount which did leave after the deduction of the total amount of expenses and losses from the total income or revenue is known as profit. The profit can be calculated majorly in three subcategories, these are shown as following: 

  1. Gross Profit
  2. Operating Profit 
  3. Net Profit

The formula of Calculation of Profit: –

“Profit =  Revenue – Expenses & losses”

Chart of Difference between Revenue and Profit: –

Basis of Difference

Revenue

Profit

Meaning

The total amount received or receivable from the operational or non-operational activities are known as Revenue. That amount which did leave after the deduction of the total amount of expenses and losses from the total income or revenue is known as profit.

Method of Calculation 

“Revenue =  Total Sales + Other Incomes – Sales Return” “Profit =  Revenue – Expenses & losses”

Dependency on Each other

It is not dependent on Profit. It is dependent on Revenue.

Categories  

Operational Revenue 
Non- Operational Revenue

  1. Gross Profit
  2. Operating Profit 
  3. Net Profit

Need to calculate 

Calculation of the amount of revenue is needed to know the total amount of earnings of the business Calculation of the amount of profit is needed to know the net amount of earnings of the business. 

Download the chart:

If you want to download the chart please download the following image and PDF file

Chart of Difference Between Revenue and Profit 300x249 - Difference Between Revenue and Profit
Chart of Difference Between Revenue and Profit
application pdf - Difference Between Revenue and Profit
Chart of Difference between Direct and Indirect incomes

 

The conclusion of the Difference: –

The Revenue includes all the share of profit, so profit depends on Revenue of the business in a particular financial year. Every new startup has to focus on their revenue first, if they get a handsome share of the market of their product then they will go to earn profits. 

Thanks for reading the topic of Difference between Revenue and Profit, 

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